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6 Mar 2007 : Column 401WH—continued

Poverty also has a significant impact on children’s health, from lower birth rates to shorter life expectancy. Children from manual social backgrounds are one and a half times more likely to die as infants than children from other social backgrounds. The important research in the Save the Children and Family Welfare Association
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survey, which was published yesterday, shows that children living in financially excluded families with no access to a bank account pay the price of being poor in the UK—the poverty premium—because that has a significant impact on household finances.

The survey also shows that poor families pay up to £1,000 more for essential goods and services such as gas, electricity, insurance and accessing cash. That includes paying about 150 per cent. more for basic household goods bought on credit, more than 50 per cent. more on credit or loans, and 10 per cent. more on gas bills paid through prepayment meters rather than by direct debit. That represents about 9 per cent. of the income of a family on £250 a week. Being poor makes people poorer.

That is the situation—what can we do about it? We are still waiting for the Government’s response to the Harker report, which I hope will flag up some measures that the Government are introducing, and I hope, too, that the Minister will give us a preview in his winding-up speech. I want to make a few suggestions. I am sure that it will not surprise the Minister to hear that some of them involve spending commitments, but before coming to that I want to make some other points.

Annette Brooke (Mid-Dorset and North Poole) (LD): Half the children in poverty are in families in which at least one parent is working. Will the hon. Lady address important issues such as training and better-quality jobs?

Kerry McCarthy: I will touch on that, but obviously in a debate such as this when several hon. Members want to speak I must skim over some issues. It is important to remember that the issue is not just getting parents into work. The focus has been on that recently, but work must pay, and be accessible and affordable to people.

Some issues do not require Government spending, and a point that is made to me time and again by campaign groups is the importance of having a cross-Department approach to tackling child poverty, perhaps with the social exclusion task force leading the way. There is some confusion about whether the Treasury or the Department for Work and Pensions is leading on the public service agreement target of halving child poverty by 2010. It would be useful to have a steer on that.

Another point that has been made is that legislation should be poverty-proofed, whether it comes from the Treasury, the DWP, the Department for Education and Skills, the Department of Health or the Department for Transport. The Minister will recall that at the Labour party conference last year we met a group of young people from an estate in south Wales who had been brought together by Save the Children. The point that they made time and again was that transport was the biggest issue in preventing them from staying in education or getting their first job. Even transport must be poverty-proofed.

Mr. David Marshall (Glasgow, East) (Lab): I congratulate my hon. Friend on securing this important debate. She mentions Departments working together, but does she agree that the devolved Parliaments and Assemblies in Scotland and Wales also have a major role to play and that we need not just a Westminster approach, but a concentrated and co-ordinated UK approach to the problem?

Kerry McCarthy: I agree entirely with my hon. Friend. I must admit that I am not that familiar with events in
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the Scottish Parliament, but recently, when I ended up speaking at a meeting in Merthyr Tydfil of all places, I spoke to a Welsh Assembly Member who leads on the issue. He stressed that in Wales there is a joined-up approach and that issues such as transport are considered in a well thought out way. We should not only emulate such approaches, but tie them in with the approach being taken at the Westminster Parliament level.

On spending, the Joseph Rowntree Foundation has estimated that it would cost about £4 billion to £5 billion extra a year to meet the Government’s targets. I do not know whether the Government accept that estimate, but I know that the Institute for Public Policy Research came up with a figure of £2 billion last year, which might be more palatable to the Treasury.

I am sure the Minister knows that there have been several suggestions on how the money might be spent if it were available. Save the Children, for example, has called on the Government to introduce seasonal grants, so that families would receive £100 per child in summer, £100 per child in winter plus an extra £100 per household to meet fuel bills. That would help families who can tick along day to day on their low income, but who cannot afford the extra items that come up. For example, in summer, there are school uniforms to buy and children do not have free school meals for those six weeks in the year. Save the Children estimates that such grants could lift 440,000 children out of poverty at a cost of £1.4 billion a year.

The End Child Poverty campaign is calling for the equalisation of child benefits, so that the second and third child each receive the same amount as the first. End Child Poverty believes that that would help large families in particular, because they are more likely to be poor.

Other people are calling for a view on how local authorities exercise their discretionary powers to provide grants to low-income families. A Citizens Advice survey found that in 2004, 42 per cent. of local authorities did not offer any grants, so in effect there is a postcode lottery.

Poor housing is a major factor. According to Shelter, 1.6 million children live in bad housing, which impacts on their health, education and emotional well-being, and even on their safety. We desperately need more investment in building social housing and meeting the decent homes target, and it has been suggested that housing should be at the heart of the social exclusion unit’s work.

Financial inclusion is also an important issue. I have been involved with it as a member of the Treasury Committee, which has produced some excellent reports recently. The Government are to be commended for what they have done so far, such as introducing basic bank accounts, but we must do more to ensure that high street banks meet their obligations. We learned yesterday that their profits hit almost £40 billion last year, and although I do not have anything against banks making profit, one would think that, at that rate, they could afford to provide basic bank accounts and free cash point machines in deprived areas without taking too much of a hit.

The private sector should also be encouraged to remove tariffs that discriminate against the low paid, such as higher costs for prepayment meters and
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penalties for people who cannot pay by direct debit. In effect, the poorest people subsidise those who can afford to pay through their bank accounts.

More support for credit unions could also make a huge difference. In my constituency, the Department for Work and Pensions growth fund has given the credit union £200,000 in capital and £50,000 in revenue a year to provide quick cash loans to people on low incomes. So far, the union has made about 200 loans at an average of £450. It says that 80 per cent. of those loans have been made to women and 60 per cent. to lone parents, which is hugely important, because about 3 million people use doorstep lenders.

I have been given figures showing that if those people were to borrow £500 over a year from Provident Personal Credit, the biggest doorstep lender in the country, they would end up paying back £825, which equates to an APR of 177 per cent. If they were to borrow the same amount from a credit union, however, they would pay about £65 in interest, which would obviously make a huge difference to that household’s financial sustainability. We are encouraging Farepak customers, who were hit by its collapse just before Christmas, to sign up to credit unions instead, as a way of saving money.

I hope that the Minister will not consider reinstating the policy—perhaps I should say “value”, because that is the term currently in use—of the married couple’s allowance, which is gesture politics at its most meaningless. Either it would be set so low as to have no impact at all or it would divert funds from the people who really need them. I am told that 13 million couples would be eligible, but if they were given even a small incentive of £100 a year, it would cost £1.3 billion. An allowance of £26 a month would equate to the £4 billion that we need to tackle child poverty, and £26 a month would do nothing to encourage a couple to get or stay married. It would be meaningless.

Whatever we think of parents’ choices or circumstances, and whether we blame or commend them, it is the children who really matter. We should spend money on all children who need it, rather than on those who happen to come from the “right” family background.

The most important element of the chid poverty strategy is the Government’s emphases on moving from welfare to work and making work pay through such initiatives as tax credits, the minimum wage, child care and so on. I fully endorse the Government’s strategy for and target of getting 80 per cent. of people into work, as well as their new strategies on incapacity benefit and lone parents.

On incapacity benefit, one in three children living in poverty has a disabled parent. Only 16 per cent. of mothers of disabled children work. In some cases, their circumstances may mean that they are unable to work, but in cases in which they just need extra child care support and extra financial help, it is important to give them the opportunity to work.

According to the Child Poverty Action Group, children of lone parents face a much higher risk of poverty—the figure is 48 per cent.—than children of couples. Giving a figure of 90 per cent., it also says that most lone parents want to work when it is right for their children that they should do so, but there are obstacles in their way, including the steep taper on
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housing benefits, inflexible working hours and the loss of passported benefits such as free school meals and free prescriptions.

The affordability and accessibility of child care also remain a problem. In a recent survey of more than 1,000 lone parents, 70 per cent. cited a lack of child care and being unable to find work that fitted around school hours as barriers to finding a job.

There is also a discrepancy between free nursery provision and tax credit rules. Parents of three to four-year-olds are entitled to 12.5 hours of nursery provision each week, but to claim tax credits parents must work more than 16 hours a week. We must extend that provision so that parents can not only undertake 16 hours of work a week, but find the time to get to and from work and collect their children from nursery. That would make a huge difference to their employability.

We must also stress that work itself is not always the answer—a point that has already been made. Some 54 per cent. of children living in poverty have a parent who is already in work. We must therefore consider whether we want to get parents into short-term jobs or long-term careers. The Single Parent Action Network has its headquarters in my constituency. I have met single parents there, and they have huge ambition and determination to do well for themselves and put their children on a secure financial footing. However, if we were to tell them that they should take up work now as a cleaner, a waitress or a shelf stacker in a supermarket on the national minimum wage, boosted by tax credits, the chances are that they would remain in such employment for the long term and that their children would still live in poverty.

If, instead, such people were encouraged to get some qualifications under their belt and to take a few years before moving into the job market, their long-term prospects would be much more secure and their financial situation much more viable. The network is doing excellent work through its study centre. It received a £400,000 lottery grant recently to help it to carry on that work, encouraging women to gain skills and qualifications, and giving them confidence and life coaching classes. We must continue that work.

I shall focus on those people who are the hardest to reach and whose problems are the hardest to solve. Much of the Government’s work so far has been to top-slice at children in poverty, lifting those just below the poverty line to just above it. However, my constituency includes the most deprived ward in south-west England, and those of us who represent areas with significant deprivation know that there are families who sometimes seem beyond help and that mere cash injections will not solve their huge, intractable problems.

I speak to head teachers in my constituency who are in absolute despair at the dysfunctional and chaotic lives of some parents who bring children to their schools. I am not saying that those parents do not care about their children—they do—but sometimes they do not know how to care for them, or they have so much to contend with in their daily lives that they cannot give their children the care, attention and love that they need to thrive. I am talking about parents who are drug users, and who might be involved in violent or abusive relationships, or might be engaged in drug dealing, crime or prostitution. About 300 women are working
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on the streets of Bristol at any given time, and many of them are mothers. Of course, some of those mothers are little more than children themselves.

I am also talking about the families of asylum seekers and refugees, who are struggling to cope with life in a strange land and to learn English and English ways. A huge number of myths circulate about what those families get, but the reality is that they get very little. Poverty is entrenched within certain ethnic minority groups—57 per cent. of Pakistani and Bangladeshi children and 43 per cent. of black children are poor. Obviously, we cannot solve those problems overnight, but it might help to focus attention if the Government were also to measure severe poverty—say at 40 per cent. of median household income, rather than the 60 per cent. of median household income that is used as the measure of relative poverty.

I welcome the Government’s attempts to address such issues holistically through such things as Sure Start and the children’s centres. In Bristol, we have also been given funding for what people have dubbed the “supernanny” scheme, where parenting experts will work with families who need help in acquiring parenting skills. That is a valuable initiative.

Mrs. Maria Miller (Basingstoke) (Con): I applaud the hon. Lady for securing the debate. Before she concludes, I would be interested to know what reasons she feels there are for the fall in real income since 1997 for the very poorest members of our society. Does that relate to the issues she highlighted regarding the poverty premium or are there other reasons for that particular impoverished group being worse off than it was in 1997?

Kerry McCarthy: I might leave it to the Minister to reply to that point in detail. I am not sure that I accept the premise of the question, certainly bearing in mind the number of people who have moved into work and the boost to household incomes through things such as the minimum wage and tax credits. Issues such as housing costs are factors, but I think that the Minister is much better briefed about that than me.

To sum up, it is clear that we cannot look at these issues solely in financial terms; we need to look at the bigger picture. To quote the Minister at a recent Downing street seminar:

That is hugely important. This is a matter not of targets, statistics or numbers on a piece of paper, but of making a lasting difference to children’s lives and the lives of the generations of children who will follow them. I hope that in some small way, by raising these issues and having this debate, we can move a little further towards achieving the goal that we have set.

11.22 am

Mr. Andrew Pelling (Croydon, Central) (Con): I express my gratitude to the hon. Member for Bristol, East (Kerry McCarthy) for raising the debate and I congratulate her on that. The debate is important, particularly with regard to my constituency, which is placed 14th in the UK in terms of the number of parents on income support. Indeed, 40 per cent. of children living in poverty, as defined by the London Child Poverty Commission, live in London. The issue concerns many of us who represent urban seats.

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The hon. Lady is right to recognise that worklessness is relevant, although I accept that the quality of jobs secured by lone parents who are seeking to better their circumstances and those of their families is also relevant. The problem is particularly relevant to worklessness in London, where the economic participation rate of lone parents is 5 per cent. below that of the rest of the UK. Good work is being done by the Government through Sure Start and other means to bring lone parents into economic activity. There are real challenges, however, in reaching out to those who are socially excluded. Despite the best efforts of national, regional and local government to secure such economic participation, my constituency has been able to fill only half the child care places that would facilitate such involvement. I know that good work has been done recently by the London Development Agency to try to put that right, but more needs to be done.

In the London borough of Croydon, 23,000 young people in families are dependent on income support or other means of benefit. It is important to consider how we deal with worklessness. The increase in the number of jobs in the Croydon economy is only half of the percentage increase in the London economy as a whole. We should, therefore, pay careful attention in a constituency such as mine to the way in which the tax credit system works, particularly its implications and the best use of child care provision.

The tax credit system, with its embedded element of child care, can cause difficulties. There are many benefits to the tax credit system: the funding goes to the parent, and there is a precise targeting of credits to those most in need. However, it also leaves parents without a good understanding of, or full information about, the real value of child care costs. Of course, there are problems with the tax credit system. I need not dwell on them—I am sure that all of us have a large constituency case load arising from it—but they can lead to a situation in which parents are discouraged from pursuing applications. Indeed, the problems of overpayments are often due to the child care cost element in the calculation.

As is often the case with any benefit system, the perverse marginality of loss of income takes place. As more work is secured, extra hours or child care are purchased. In combination with the tapering off of benefits, that leads to an extremely adverse disincentive to secure the progression in the work market that would create a situation in which children are taken out of poverty.

My final point about the way in which the tax credit system relates to child poverty is that providers of child care sometimes do not get money because of entitlement misunderstandings or even fraud. What work have the Government done on changing the way in which the tax credit system is undertaken to remove the embedding of the child care element from the calculations? Perhaps it would be better to place a fixed amount of child care credit on a credit card in some way, bearing in mind the ambitions of the Government to ensure that the banking and payments system continues to give support to the most socially excluded. That would provide for those purchasing child care to have a good understanding of the fixed amount of child care moneys available and ensure that the
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provider is much more likely to receive the money and, perhaps, to go back to Her Majesty’s Revenue and Customs in order to claim it.

Through the creation of extra transparency on the value and costs of child care, we might encourage the further development of that market and give a better understanding to those securing it and those who provide it. In that way, we could provide a special element to the tackling of child poverty, which is a curse in my constituency and in London as a whole.

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